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Question 1 of 10
1. Question
Which of the following are included in the computation of gross revenues from the securities business?
I. Professional income for legal services
II. Fees for solicitation of proxies for securities
III. Income from service charges for securities
IV. Operating income of a subsidiaryCorrect
Included in the computation of gross revenues from the securities business are the fees for solicitation of proxies for securities and income from service charges for securities. These transactions must be added without any duplications. The gross revenue from securities business must be filed on a general assessment payment form of SIPC-6.
Incorrect
Included in the computation of gross revenues from the securities business are the fees for solicitation of proxies for securities and income from service charges for securities. These transactions must be added without any duplications. The gross revenue from securities business must be filed on a general assessment payment form of SIPC-6.
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Question 2 of 10
2. Question
According to the Regulation of Short Sales, what kind of short sales are illegal and prohibited in any way?
I. The vast majority of short sales are illegal.
II. Short sales to depress the price of a security to be included on the security of others
III. Abusive short sale practices
IV. Short sales effected to manipulate the price of a stockCorrect
According to the Regulation of Short Sale, abusive short sale practices are prohibited. It must not be engaged in transactions to depress the price of the security just to be involved in other’s purchase and sale of securities. Short sales must not manipulate the price of a stock. However, short sales are legal at the vast majority to sell a stock or borrow stocks for delivery.
Incorrect
According to the Regulation of Short Sale, abusive short sale practices are prohibited. It must not be engaged in transactions to depress the price of the security just to be involved in other’s purchase and sale of securities. Short sales must not manipulate the price of a stock. However, short sales are legal at the vast majority to sell a stock or borrow stocks for delivery.
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Question 3 of 10
3. Question
Which of the following are marking requirements in placing an order with a broker-dealer?
Correct
According to Regulation SHO Rule 200, an order placed with a broker-dealer must be marked as “long”, “short”, or “short exempt.” The short sale of securities must be delivered on the due date before effecting any equity securities.
Incorrect
According to Regulation SHO Rule 200, an order placed with a broker-dealer must be marked as “long”, “short”, or “short exempt.” The short sale of securities must be delivered on the due date before effecting any equity securities.
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Question 4 of 10
4. Question
Which of the following statements best describes how a margin accounts work?
Correct
A margin account works when a broker charges an interest rate on the borrowed money. There must be a minimum margin required in each transaction. A maintenance margin is needed for trading. Minimum margins are calculated by subtracting the borrowed amount from the total equity including the cash and value of securities.
Incorrect
A margin account works when a broker charges an interest rate on the borrowed money. There must be a minimum margin required in each transaction. A maintenance margin is needed for trading. Minimum margins are calculated by subtracting the borrowed amount from the total equity including the cash and value of securities.
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Question 5 of 10
5. Question
Which of the following terms is defined as a trader who trades four times or more in five business days, as long as there are more than six percent trading activities on the same five-day period?
Correct
Under the day-trading margin requirements of FINRA, a pattern day trader trades four times or more in five business days. It also includes customers who trade more than six percent of the customer’s total activity on the same five-day period. A pattern day trader maintains a minimum of $25,000 equity on any trading days. In cases where the equity falls below the minimum, trading will not be permitted.
Incorrect
Under the day-trading margin requirements of FINRA, a pattern day trader trades four times or more in five business days. It also includes customers who trade more than six percent of the customer’s total activity on the same five-day period. A pattern day trader maintains a minimum of $25,000 equity on any trading days. In cases where the equity falls below the minimum, trading will not be permitted.
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Question 6 of 10
6. Question
What are the disadvantages of an isolated transaction test?
I. It is insufficient to serve as a workable distinction between customers and consumers.
II. It may not be useful in all important situations and circumstances.
III. It may not provide relevant information in selling tangible personal properties.
IV. It is not useful for transactions on services rendered.Correct
According to Regulation S-P, isolated transaction tests may be insufficient in serving as a workable distinction between customers and consumers. It may also not be useful in any situation. However, it may help clarify the customer relationships in certain circumstances. It accommodates customers in buying or liquidating securities without having a close business relationship.
Incorrect
According to Regulation S-P, isolated transaction tests may be insufficient in serving as a workable distinction between customers and consumers. It may also not be useful in any situation. However, it may help clarify the customer relationships in certain circumstances. It accommodates customers in buying or liquidating securities without having a close business relationship.
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Question 7 of 10
7. Question
How can a written notice be reasonably understandable, clear, and conspicuous under Section 248.3 in Regulation S-P?
I. Short explanatory sentences or bullet lists must be used.
II. Avoid multiple negatives.
III. Use definite, concrete, and active voices.
IV. Never provide only a summary of the notice.Correct
In making a clear and conspicuous notice, it must consist of short explanatory sentences, and definite, concrete and active voices. It must have a limited number of negatives such as “not,” or “do not.” It must not be too long and very detailed. A bullet-list may be used to focus only on the important parts. Another requirement is it shall be designed to call attention where it could be read easily.
Incorrect
In making a clear and conspicuous notice, it must consist of short explanatory sentences, and definite, concrete and active voices. It must have a limited number of negatives such as “not,” or “do not.” It must not be too long and very detailed. A bullet-list may be used to focus only on the important parts. Another requirement is it shall be designed to call attention where it could be read easily.
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Question 8 of 10
8. Question
Which of the following is not included in the required structure in making a notice in relation to safeguarding and providing personal or financial information?
Correct
In providing notices on personal or financial information, using different interpretations must be avoided. It may be used for comparisons of interpretations, but it is somehow not useful. It would just give conflicts in understanding the provided notice and it would not qualify as a reasonably understandable notice.
Incorrect
In providing notices on personal or financial information, using different interpretations must be avoided. It may be used for comparisons of interpretations, but it is somehow not useful. It would just give conflicts in understanding the provided notice and it would not qualify as a reasonably understandable notice.
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Question 9 of 10
9. Question
Which of the following situations may not be done by a creditor in a cash account transactions?
Correct
In permissible transactions for cash accounts, a creditor may not buy or sell to any customer security or other asset if the customer only made a partial payment. Payments must be made in full before proceeding with the transaction. A creditor must have an agreement with a customer in good faith.
Incorrect
In permissible transactions for cash accounts, a creditor may not buy or sell to any customer security or other asset if the customer only made a partial payment. Payments must be made in full before proceeding with the transaction. A creditor must have an agreement with a customer in good faith.
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Question 10 of 10
10. Question
Which of the following agreements is defined as any agreement in connection with a call or put option in which a bank is in control of holding the underlying assets obligated to be delivered to the creditor?
Correct
An escrow agreement is applied where a bank is in control of holding the underlying assets to be delivered to the creditor. A bank may also be able to receive underlying assets or cash or cash equivalents against payment for the exercise price of the call or put option. Escrow agreements must be used for cash account transactions whether there is a short call or short put.
Incorrect
An escrow agreement is applied where a bank is in control of holding the underlying assets to be delivered to the creditor. A bank may also be able to receive underlying assets or cash or cash equivalents against payment for the exercise price of the call or put option. Escrow agreements must be used for cash account transactions whether there is a short call or short put.